It's common for procrastinators to get their returns on April 15, sign them without a second glance, and go on their way. That got expensive for a California couple yesterday.
The preparer had left their Social Security benefits off their 2005 1040. The IRS computers noticed, and the IRS sent a bill and a penalty notice to the couple for failure to report. The couple attemped to get out of the penalty based on reliance on the preparer, but the Tax Court wasn't buying (citations omitted):
"The general rule is that the duty of filing accurate returns cannot be avoided by placing responsibility on an agent." Taxpayers have a duty to read their returns to ensure that all income items are included. Reliance on a preparer with complete information regarding a taxpayer's business activities does not constitute reasonable cause if the taxpayer's cursory review of the return would have revealed errors. "Even if all data is furnished to the preparer, the taxpayer still has a duty to read the return and make sure all income items are included."
The Moral? If you don't have time to read your return before April 15, get an extension.
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
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